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Cite as: [2003] EWCA Civ 1110

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Neutral Citation Number: [2003] EWCA Civ 1110
Case No: A3/2002/2325

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
HH Judge Richard Seymour

Royal Courts of Justice
Strand,
London, WC2A 2LL
25 July 2003

B e f o r e :

LORD JUSTICE PETER GIBSON
LORD JUSTICE DYSON
and
LORD JUSTICE LONGMORE

____________________

Between:
P & S PLATT LTD.
Respondent
- and -

CROUCH AND ANOTHER
Appellants

____________________

(Transcript of the Handed Down Judgment of
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)

____________________

Mr. Mark Warwick (instructed by Messrs Lionel J Lewis and Company of Blackheath) for the Respondent
Mr. Nicholas Caddick (instructed by Messrs Nicholsons of Lowestoft) for the Appellants

____________________

HTML VERSION OF JUDGMENT
AS APPROVED BY THE COURT
CROWN COPYRIGHT
____________________

Crown Copyright ©

    Peter Gibson L.J.:

  1. English law has long recognised that a conveyance by a grantor of part of his property carries with it certain rights over the retained land which are not expressly conveyed by the conveyance. Because of the common ownership of the property such rights cannot have been easements prior to the conveyance. Under the rule in Wheeldon v Burrows (1879) 12 Ch. D. 31 on the conveyance there pass to the grantee as easements all quasi-easements over the land retained which were continuous and apparent, necessary for the reasonable enjoyment of the land conveyed and were at the time of the conveyance used by the grantor for the benefit of the land conveyed. Somewhat similar but more extensive in effect is s. 62 Law of Property Act 1925, replacing s. 6 Conveyancing Act 1881, and designed to make it unnecessary to set out the full effect of every conveyance:
  2. "(1) A conveyance of land shall be deemed to include and shall by virtue of this Act operate to convey, with the land, all buildings, erections, fixtures, commons, hedges, ditches, fences, ways, waters, watercourses, liberties, privileges, easements, rights, and advantages whatsoever, appertaining or reputed to appertain to the land, or any part, thereof, or, at the time of conveyance, demised, occupied, or enjoyed with, or reputed or known as part or parcel of or appurtenant to the land or any part thereof.
    (2) A conveyance of land, having houses or other buildings thereon, shall be deemed to include and shall by virtue of this Act operate to convey, with the land, houses, or other buildings, all outhouses, erections, fixtures, cellars, areas, courts, courtyards, cisterns, sewers, gutters, drains, ways, passages, lights, watercourses, liberties, privileges, easements, rights, and advantages whatsoever, appertaining or reputed to appertain to the land, or any part thereof, or, at the time of conveyance, demised, occupied, or enjoyed with, or reputed or known as part or parcel of or appurtenant to, the land, houses or other buildings conveyed, or any of them or any part thereof."

    But s. 62(4) provides:

    "This section applies only if and as far as a contrary intention is not expressed in the conveyance, and has effect subject to the terms of the conveyance, and to the provisions therein contained."
  3. This appeal gives rise to the question whether on a transfer by vendors of part of their property, certain quasi-easements over the retained property became legal easements by the operation of s. 62. It is an appeal by the Defendants, Philip Crouch and his wife Gwendoline, from the order made on 25 October 2002 by His Honour Judge Richard Seymour Q.C. sitting as a Judge of the Chancery Division. By his order the Judge granted the Claimant, P & S Platt Ltd., certain declarations which it had sought as to rights which it claimed to have been transferred to it by virtue of s. 62 when the Defendants transferred to the Claimant on 14 September 2001 the Petersfield House Hotel in Horning on the Norfolk Broads. The Judge refused permission to appeal but on application to this court Arden L.J. granted permission on the papers.
  4. Horning stands on the River Bure and one of the principal roads through Horning is Lower Street. The Defendants in 1985 acquired 3 pieces of land in Horning: (1) the hotel and its grounds which lie away from the river and are north east of Lower Street, (2) land which formed part of the hotel grounds and on which they built a house called Robin's Nest also lying to the north east of Lower Street, and (3) an area of land called Noosa Sound lying to the south west of Lower Street and bordering on the river. Noosa Sound is part of an island in the river. Access to it from Lower Street is by means of a footbridge over a lagoon. On Noosa Sound the Defendants built a bungalow, and on the river side there are moorings for up to 3 boats. Mooring posts are fixed to the land as are mooring signs. On the lagoon side of Noosa Sound there are moorings for 2 boats.
  5. The Defendants' son, Robin Crouch, assisted them in the running of the hotel and came in effect to manage it. Robin's Nest was built for him and his family.
  6. As at May 2001 the river moorings were used by the hotel for its guests. The lagoon moorings were subsequently let by the Defendants. There were two signs, erected in about September 2000, along the river bank in Noosa Sound which advertised the hotel. These signs replaced earlier signs which had the same purpose. The amenities of the hotel were there briefly advertised. The signs included the statement:
  7. "Moorings are Strictly for Hotel Customers
    (Overnight Moorings are for Restaurant Patrons Only)"
  8. On the footbridge leading to Noosa Sound in about May 2001 was a sign saying:
  9. "WARNING
    This is a Private Mooring. For The Exclusive Use Of Hotel Customers. Others Will Be Treated As Trespassers And Offending Boats Will Be TOWED AWAY. By order of the proprietor. (You have been warned)".

    At the Lower Street end of the footbridge leading to Noosa Sound was a sign reading "PRIVATE NO PUBLIC RIGHT OF WAY HOTEL RESIDENTS ONLY".

  10. Mr. Robin Crouch supervised the river moorings to ensure that they were only used by visitors to the hotel. Between April and September each year the moorings would often be booked by visitors . He estimated that the trade from visitors using the river moorings amounted to approximately 2.87% of the hotel's annual turnover (net of VAT) of 376,299 in the year prior to the hotel being put up for sale. The lagoon moorings were separately let and not treated as part of the hotel business.
  11. In 2001 the Defendants decided to put the hotel on the market through specialist estate agents, Robert Barry & Co., a director of which, Paul Bartrop, was concerned with the sale. The sales particulars issued in or about April 2001 made clear that the hotel was being sold with all its assets and goodwill. Reference was made to the turnover of 376,299. Offers around 775,000 were invited. The reverse of the front page of the particulars gave the hotel website and details of the trade and the price invited. Under "Other properties" said to be available by separate negotiation were brief details of Robin's Nest and of the Noosa Sound bungalow, the latter being described as:
  12. "Luxury riverside bungalow: One bedroom with jacuzzi spa bath, kitchen, lounge, veranda, moorings and garden."
  13. The hotel website referred to "our private riverside moorings". Under the heading "Fishing and Mooring" appeared the following:
  14. "The riverside moorings at the hotel are a lovely place to spend a lazy afternoon. You can watch the boats go by, feed the ducks, enjoy the wildlife or do a spot of fishing".

    Details of the available fishing were then given.

  15. Peter Platt, a Director of the Claimant, got in touch with Mr. Bartrop on 8 May 2001 and arranged to view the hotel. He did this on 22 May and the next day offered, subject to contract, to purchase the hotel for 675,000 and indicated that he would like options to purchase Robin's Nest and Noosa Sound.
  16. There then followed negotiations culminating on 31 August 2001 in an agreement ("the Hotel Sale Agreement") between the Defendants (defined as "the Seller") of the first part, Mr. Robin Crouch of the second part and the Claimant (defined as "the Buyer") of the third part. Clause 1 contained various definitions including:
  17. ""the Assets" the Freehold Property the Equipment (and all other assets of whatever nature owned by the Seller and employed in the Business at the Completion Date)

    "the Business" the business of an Hotel carried on by or on behalf of the Seller at the Completion Date relating to the Business

    "the Completion Date" 14th September 2001

    "the Contents" all completed contracts, agreements, orders, engagements and arrangements of the Seller at the Completion Date relating to the Business

    .

    "the Freehold Property" the property described in the First Schedule including the buildings, fixtures and fittings thereon

    .

    "the Goodwill" the goodwill of the Business .

    "the Equipment" the furniture equipment chattels and other items owned by the Seller .

    .

    "the Purchase Price the sum of 700,000 ."

    The property described in the First Schedule was the hotel "as edged red on the Plan attached for identification purposes". The plan also showed edged green the property retained by the Defendants, viz. Robin's Nest and Noosa Sound.

  18. Clause 2 provided:
  19. "Agreement for sale
    The Seller shall sell and the Buyer shall purchase the Business as a going concern and the Assets and the Goodwill and the benefit (so far as the Seller can assign the same) of the Contracts at the Purchase Price."
  20. Clause 9 provided that the Freehold Property was sold subject to a number of specified matters, including in clause 9.4 "all . quasi-easements". Thus the draftsman was well aware of the fact that the sale of part only of the Defendants' property made quasi-easements a matter of relevance. It is plain that the application of s. 62 to the transfer on completion of the Hotel Sale Agreement was agreed not to be excluded or modified save to the extent indicated in the Standard Conditions of Sale (Third Edition) which was incorporated by clause 11. Condition 3.4 provided:
  21. "3.4 Retained Land
    3.4.1 The following provisions apply where after the transfer the seller will be retaining land near the property.
    3.4.2 The buyer will have no right of light or air over the retained land, but otherwise the seller and the buyer will each have the rights over the land of the other which they would have had if they were two separate buyers to whom the seller had made simultaneous transfers of the property and the retained land.
    3.4.3 Either party may require that the transfer contain appropriate express terms."
  22. By clause 20 the Defendants gave warranties to the Claimant including in para. 20.6 a warranty that the last year's accounts of the Business gave the Claimant a true and fair view of the financial results of the Business for that period.
  23. Also on 31 August 2001 the Defendants and the Claimant entered into an Option Agreement whereby in consideration of 1 paid by the Claimants to the Defendants, they granted the Claimant an option to buy two parcels of land. One was described as "the land and bungalow abutting the Broads including the moorings and known as "Noosa Sound" as edged red on the Plan attached for identification purposes only". The plan showed the whole of Noosa Sound. The second parcel was a small area north west of Lower Street forming part of the hotel grounds and which was intended as a car park for the bungalow on Noosa Sound. The purchase price specified for the exercise of the option was 200,000. The period during which the option was exercisable was to expire on 28 February 2002. The solicitors to the Claimant protected its rights under the Option Agreement by registering a land charge.
  24. Completion of the sale of the hotel took place on 14 September 2001. The transfer thereby executed contained no provisions indicative of an intention to exclude or modify the application of s. 62.
  25. The option was not exercised on or before 28 February 2002. Mr. Platt thought that he had until 31 March 2002 to do so, that being the expiry date for the option which was at one time suggested. On 1 March 2002 the Defendants' solicitors faxed a letter to the Claimant's solicitors requesting the cancellation of the land charge. Soon after that Mr. Platt contacted Mr. Robin Crouch and tried to persuade him to extend the time for the exercise of the option, but the Defendants refused.
  26. On 3 March 2002 the Defendants instructed a handyman to paint out references to the hotel on the signs at Noosa Sound, to erect "No Mooring" signs and to put a gate on the footbridge leading from Lower Street to Noosa Sound. Mr. Platt on 6 March 2002 objected to what was being done. That day the Claimant's solicitors wrote to the Defendants' solicitors claiming that by virtue of the transfer of 14 September 2001 the river moorings and other rights were transferred to the Claimant under s. 62 and the rule in Wheeldon v Burrows. Proceedings for an injunction were threatened.
  27. Proceedings were commenced on 18 April 2002. The Claimant sought an interim injunction, but on 29 April the Defendants offered acceptable undertakings pending the hearing of the action. In the Particulars of Claim the following rights were claimed to have been transferred on the transfer of the hotel to the Claimant:
  28. (i) the right for the hotel's residents or customers (or prospective residents or customers) to moor boats at the 3 river moorings at Noosa Sound;

    (ii) the right to locate and display 3 mooring signs at those moorings;

    (iii) the right to locate and display 2 large boards (naming and advertising the hotel) at specific places on Noosa Sound;

    (iv) the right for the hotel's residents and customers to fish at the location of the 3 moorings;

    (v) a right of way on foot for the hotel's residents and customers (or prospective residents and customers) between the river moorings along the pathway to Lower Street; and

    (vi) a right to locate and display signs advising the hotel's customers of the pathway at two places.

    The Claimant sought declarations that it had those rights and an injunction restraining the Defendants from interfering with the rights.

  29. The Defendants by their Defence and Counterclaim admitted that the rights claimed were benefits or advantages enjoyed by the hotel when they owned it, but they pleaded that the parties intended that upon the Claimant buying the hotel, it would only be able to use Noosa Sound or to enjoy rights over Noosa Sound if it exercised its option or if the Defendants gave their consent. Reliance was placed on the terms of the correspondence passing between the parties in the course of the negotiations and in particular on a letter dated 9 August 2001 from the Defendants' solicitors to the Claimant's solicitors to which I will return shortly. It was denied that the claimed rights appertained or were reputed to appertain to or were enjoyed with or were reputed or known as part or parcel of the hotel. It was also pleaded that the mooring rights, the right to locate and display mooring signs and the claimed right to fish would amount to exclusive possession of the moorings and could not subsist as easements. It was also averred that if the claimed rights did vest in the Claimant, the Defendants would seek rectification of the transfer, the omission to include in the transfer a provision excluding s. 62 being said to be the result of a mutual error. Rectification was the relief sought by the counterclaim.
  30. At the trial the judge heard evidence from a number of witnesses including Mr. Platt and Mr. Robin Crouch. In his judgment the judge noted the acceptance by Mr. Caddick (appearing then for the Defendants, as he does before this court) that the effect of Condition 3.4 was to incorporate s. 62(1) into the Hotel Sale Agreement. The judge dealt with two issues on the application of s. 62: (1) Did the rights claimed deprive the Defendants of the beneficial use of their retained land such that the rights were not capable of being easements? (2) Were the benefits and advantages relating to Noosa Sound of which the hotel had previously availed itself not intended to pass with the transfer of the hotel to the Claimants and thus did not pass?
  31. The judge rejected Mr. Caddick's submissions on the first issue subject to one point. He found that the interference, caused by the mooring posts and the various signs, with the Defendants' use of Noosa Sound was minimal and that the mooring rights were not exclusive to the hotel but the moorings could be used by the Defendants as well. But he was not satisfied on the evidence that there was sufficient use by patrons of the hotel of the claimed fishing right for an easement to have been created on the transfer.
  32. The second issue was the substantial issue before the judge. He considered two decisions of this court, Birmingham, Dudley and District Banking Co. v Ross (1888) 38 Ch D 295 ("the Birmingham case") and Selby District Council v Samuel Smith Old Brewery (Tadcaster) (2000) 80 P. & CR 466 ("the Selby case"), and accepted Mr. Caddick's submission that in determining whether any, and if so, what rights passed under a transfer by virtue of s. 62, it was necessary to have regard to the intention of the parties on that point. He noted the acceptance by Mr. Caddick that the burden lay on the party asserting that s. 62 did not have effect, and the judge posed the question whether the Defendants had discharged that burden.
  33. The judge then considered the negotiations in some detail. He disbelieved Mr. Robin Crouch on one piece of evidence as to what was said by him to Mr. Platt which only emerged in cross-examination and had not been put to Mr. Platt. The judge described the evidence as fabricated. He found, however, that each of Mr. Platt and Mr. Robin Crouch gave self-serving answers and that he could not rely on the evidence of either of them as to what was in his contemplation during the negotiations. The judge expressed himself as satisfied that neither considered the possibility that the option to purchase Noosa Sound would not be exercised. The judge found that he could only rely on Mr. Bartrop's contemporaneous notes and on what was said by the parties' solicitors in correspondence. The judge went through the various documents relied on by the Defendants, but found that they did not establish that the Claimant and the Defendants had a common intention that no rights of mooring on the river moorings or the ancillary rights were to pass on the transfer of the hotel.
  34. The judge then turned to the question of rectification which, he said, had virtually disappeared as an issue by the end of the trial, and in any event he resolved that question against the Defendants by finding that there was no shared intention as contended for by Mr. Caddick. The judge accordingly made the declarations claimed by the Claimant other than the alleged right of fishing, and dismissed the counterclaim. No injunction was granted to the Claimant.
  35. Mr. Caddick on this appeal does not seek to argue for rectification, but he again raises the two points on the applicability of s. 62 which he took before the judge. He says that:
  36. (1) the judge was wrong to find that a right to use the river moorings and the other ancillary rights passed to the Claimant on the transfer of the hotel, because the common intention of the parties, as ascertained from the various documents in evidence, including the correspondence in the course of negotiations, was that no such rights were to pass; and
    (2) the judge was wrong to find that the right to use the river moorings was capable of being an easement.
  37. Mr. Warwick, appearing in this court for the Claimant, as he did below, submits that the judge was right for the reasons he gave. He argues that this court should not interfere with the judge's conclusions.
  38. I will consider Mr. Caddick's two points in turn.
  39. (1) The Birmingham point

  40. The foundation for Mr. Caddick's submissions was the decision of this court in the Birmingham case, which, he said, showed that in order to determine what rights passed under s. 62 it was necessary to look at the intention of the parties. He argued that it was permissible for the court to look at what the parties said to each other in the course of negotiations so as to reach a conclusion on that intention at the time of contract and conveyance. If that was wrong, he submitted that the court could and should look at some of the documents such as a business plan produced by the Claimant to obtain funding from its bank, and a valuation produced for the bank, from which to infer such intention.
  41. At the outset of the hearing, this court questioned the appropriateness both of looking at what was said in negotiations prior to the contract, in order to arrive at the common intention at the time of the contract, and of the emphasis laid on what the parties intended in the circumstances of this case where it is not in dispute that s. 62 was not excluded from or modified in any material respect in the contract or transfer but was made applicable to the contract, and the transfer contained no contrary indication. Mr. Caddick himself submitted in his skeleton argument that the cases showed that s. 62 raised a straightforward factual issue whether any particular right claimed was one which appertained to or was reputed to appertain to or was enjoyed with the land in question. That would not appear to depend on intention.
  42. The Birmingham case involved a building scheme. The corporation of Birmingham secured the development of a large area by entering into building agreements with different builders to whom the corporation granted leases on completion of the buildings built by them respectively. One builder, Daniell, erected a building to a height of 48 feet, and assigned his interest under his lease to the claimants. At the time of the lease there was only a low building on the land the other side of the road, but the land was part of the area the subject of the building scheme. Another builder, the defendant Ross, subsequently commenced erecting a building 80 feet high on the other side of the road to the claimants' buildings. The claimants sought an injunction to restrain interference with their right to light. Kekewich J. dismissed the action and this court dismissed the appeal.
  43. Cotton L.J. referred to the predecessor of s. 62 (although not mentioned in the argument before him) but said (38 Ch. D. at p. 307) that the light claimed could not be said to be a light, within the meaning of the section, enjoyed with the house. He said that when the lease was granted it was obvious to both parties that this was a large tract of land bought by the corporation for effecting an improvement and to be built on. He said that the light then enjoyed could not be considered as enjoyed within the meaning of the section because the circumstances known to both parties showed that there could be no expectation of the continuance of that light. A light enjoyed by a person under the statute must be "that which he has enjoyed under circumstances which would lead to an expectation that the enjoyment of that light would be continued, and that it would not be simply precarious" (pp. 307, 8). Cotton L.J. referred to the implied obligation of a grantor not to interfere with his grant and said (at pp. 308, 9):
  44. "But when the question is as to an implied obligation we must have regard to all the circumstances which existed at the time when the conveyance was executed which brought the parties into that relation from which the implied obligation results; I quite agree that we ought not to have regard to any agreement during the negotiations entered into between the Plaintiffs and the corporation; except in this way; if we find that any particular space in fact was left open at the time when the lease was granted, and that that open space was contracted to be left open during the negotiation which took place, and is not referred to in the lease, we must have regard to the fact of that open space being left, and we must have regard to the fact that by agreement between the parties the lessor had bound himself not to build upon that space; and also we must, in my opinion, in determining what obligation results from the position in which the parties have put themselves, have regard to all the other facts which existed at the time when the conveyance was made, or when the lease was granted, and which were known to both parties."

    On the facts Cotton L.J. found that Daniell knew of the building scheme and so he found no interference with the claimants' rights.

  45. Lindley L.J. considered the state of things at the time the lease was granted and said (at p. 311):
  46. "I think [counsel for the claimants] was quite right in saying that we are not to go into the preliminary negotiations which resulted in the final lease. They might be important, and perhaps would be necessarily important, if we were considering whether the lease should be rectified or not, but for the purpose of construing the lease all such considerations as those ought to be disregarded. But the state of the property is all important; and what was being done with it is all important."

    He referred to the building scheme and concluded that the easement of light impliedly granted by the lease was of such amount as would come over the corporation's land to Daniell's house after the corporation had built what it liked on the other side of the street.

  47. Bowen L.J. referred (at p. 315) to Daniell's knowledge that houses were to be built on the other side of the street and that once they were built above the level of the house in existence there must be some interference with his lights and that there was no stipulation as to the height of the house to be built there, the only protection to his light being the width of the road.
  48. The good sense of the decision in the Birmingham case is manifest. However, it has frequently been considered in subsequent cases, no doubt because it is not entirely obvious from the three separate judgments what is to be derived from this court's decision.
  49. One view of the Birmingham case which has been applied in subsequent cases and approved by text book authorities was expressed by Jenkins L.J. in Wright v Macadam [1949] 2 KB 744 at pp. 751-2. He was there considering exceptions to the rule that a right in fact enjoyed with property will pass on a conveyance of the property by virtue of the grant to be read into the conveyance by virtue of s. 62. One exception was if the right was not capable of existing as an easement. He continued (at p. 751):
  50. "A further exception has been recognized in cases in which there could in the circumstances of the case have been no expectation that the enjoyment of the right could be other than temporary."

    He then referred to the Birmingham case. Jenkins L.J. summarised the facts of that case. His summary included (at p. 751):

    "Somebody took a lease of one of the houses at a time when an adjoining plot only had built upon it old buildings of less height than those contemplated by the scheme; but it was well known to everybody that the intention was, and the building scheme demanded, that this plot should be built upon to a greater height."

    He quoted the remarks of Cotton L.J. at p. 307 to which I have adverted in para. 32 above, and said (at p. 752):

    "The learned Lord Justice, I think, meant no more than this, that it was knowledge common to both parties that the existing low building was going to be replaced by a higher one and, that being so, the fortuitous access of extra light to the lessee's building while the scheme was being carried to completion could not be regarded as an enjoyment of light which would pass to the lessee a right to have it continued in the same degree."
  51. Jenkins L.J.'s proposition extracted from the Birmingham case was applied by this court in Hair v Gillman [2000] 3 EGLR 76 G. In Megarry & Wade: The Law of Real Property 6th ed (2001) para. 18-115 under the heading "Contrary Intention" it is stated:
  52. "Section 62 applies "only if and as far as a contrary intention is not expressed in the conveyance" . But the section is also subject to any contrary intention which may be implied from circumstances existing at the time of the grant. If, for example, the plot sold and the plot retained are both subject to a building scheme, the purchaser of a house standing on the plot sold will not be able to prevent the plot retained from being built upon so as to diminish his light; for the light was enjoyed "under such circumstances as to show that there could be no expectation of its continuance.""

    The authority given for the last sentence is the Birmingham case at p. 307 per Cotton L.J. A similar comment based on the Birmingham case is made in Emmet on Title para. 17.076.

  53. In the Selby case the defendant brewery had purchased a car park site from the claimant council, the brewery owning almost all the surrounding property. At the same time the brewery granted the council a conditional option to repurchase the car park site. On the exercise of the option a contract incorporating a condition in the same terms as condition 3.4, which I have set out in para 13 above, was to apply. The question was whether the rights thereby reserved to the brewery over the car park site were, as the council contended, established easements at the date of the grant of the option or, as the brewery argued, all quasi-easements enjoyed by the land it retained over the car park site at the date of the exercise of the option. This court had regard to the circumstances existing at the time of the bargain to infer the common intention that the parties were to be restored to their previous positions, and accordingly held that the rights reserved were only the established easements at the date of the grant.
  54. What were the material circumstances at the time of the grant in the present case? The judge was persuaded by Mr. Caddick that the entire negotiations leading to the sale of the hotel provided relevant material for deciding whether s. 62 operated to convey the mooring and ancillary rights. In the Birmingham case, as can be seen from the quotations in paras. 32 and 33 above, evidence of negotiations was regarded as irrelevant, save perhaps evidence of agreements concluded in the negotiations, although such evidence would be important for rectification. The rule, most clearly enunciated in Prenn v Simmonds [1971] 1 WLR 1381, that for the purpose of construing a contract the law excludes from the admissible factual background the previous negotiations of the parties is explained by Lord Hoffmann in ICS Ltd. v West Bromwich Building Society [1998] 1 WLR 896 at p. 913 as being due to "reasons of practical policy". What is said in the course of negotiations provides too uncertain a guide as to what is the position between contracting parties when later they commit themselves finally by their contract. Although Mr. Caddick took us carefully through the pre-contract documentation, I was not persuaded that anything other than the particulars of sale and replies to pre-contract enquiries was relevant, describing as they do what was being sold. Documents such as the valuation obtained for the bank which was to lend to the Claimant or the Business Plan supplied by the Claimant to its financiers were brought into being for the particular purposes of the Claimant prior to contract and do not necessarily reflect the circumstances known to the parties at the time of contract. Much of the correspondence relied on was equivocal, giving rise to arguable points, all of which the judge carefully considered and on all of which the judge reached conclusions adverse to the Defendants.
  55. The judge paid particular attention to the letter dated 9 August 2001 from the Defendants' then solicitors to the Claimant's solicitors in view of the weight placed on it by Mr. Caddick. The letter enclosed 3 agreements, and commented on the third agreement in this way:
  56. "Option Agreement on "Noosa Sound" which is to run from 28th February 2002 (six months assuming completion on 1st September 2001). After the Hotel sale and during the Option Period the current arrangement for Hotel guests to occasionally pass over "Noosa Sound" will discontinue, although our Clients may give consent from time to time strictly at their absolute discretion. Both "Noosa Sound" and the moorings are let at present but full vacant possession will be available on completion, unless your Clients wish to make their own arrangements with those concerned."
  57. If this fell to be construed as evidencing an agreement or understanding between the parties that the mooring and ancillary "rights" were to come to an end on the hotel sale and so to be excluded from the operation of s. 62 even though the contract and transfer were silent as to such exclusion, then I can see an argument that this would be a relevant circumstance known to the parties and giving rise to an expectation that the rights would not be easements granted on the transfer, albeit that the more obvious remedy would be rectification. But there are at least two insuperable difficulties facing Mr. Caddick. The first is that there is no evidence of any such agreement or understanding. As it is, it is merely a statement on behalf of the Defendants not reflected in the contract or transfer with which it is inconsistent by reason of the admitted applicability of s. 62. The second is that again the language is imprecise, giving rise to questions of construction, as the judge pointed out in deciding those questions adversely to the Defendants.
  58. To my mind the evidence is clear that the rights in question did appertain to and were reputed to appertain to and were enjoyed with the hotel, being part of the hotel business and advertised as such and enjoyed by the hotel guests. The rights were continuous and apparent, and so it matters not that prior to the sale of the hotel there was no prior diversity of occupation of the dominant and servient tenancies. Accordingly, I reach the conclusion that s. 62 operated to convert the rights into full easements, subject to Mr. Caddick's second point, to which I now turn.
  59. (2) Rights capable of being easements

  60. It is not in dispute that a right will only pass under s. 62 if it is a right capable of existing as an easement (Megarry & Wade op. cit. para. 18-113). It is also common ground that the rights claimed by the Claimant are in principle capable of being easements.
  61. However, Mr. Caddick relies on the line of authorities which say that if the right claimed would effectively deprive the servient owner of any reasonable user of the area of land over which it is exercisable, that right is not capable of being an easement (see Copeland v Greenhalf [1952] Ch. 488 at p. 498 per Upjohn J., London & Blenheim Ltd. v Ladbroke Retail Parks Ltd. 1992 1 WLR 1278 at p. 1288C per His Honour Judge Paul Baker Q.C. sitting as a High Court judge and Batchelor v Marlow (2001) 82 P & CR 36).
  62. Essentially this is a question of fact and degree on which this court will only interfere with the assessment of the trial judge if persuaded that the judge made some significant error or was otherwise plainly wrong. His view was that there was only minimal interference through the rights with the use of the servient tenement.
  63. Mr. Caddick submits that the judge erred in applying the law. Mr. Caddick relied on two matters. First, he says that the judge wrongly ignored the nature of Noosa Sound as being a luxury holiday home on the Broads, for which privacy and an uninterrupted riverfront are crucial, whereas the right to moor along the whole riverfront and to pass over Noosa Sound would seriously impair the Defendants' ability to use their land. I accept that the easements do detract from the Defendants' enjoyment of their land, but I am wholly unable to accept that this effectively deprives them of any reasonable user of Noosa Sound. True it is that in the summer months there will be boats moored at times along the frontage to the river but the boats could be the Defendants' own boats and for a substantial part of the year there will be no boats moored. Nor can I accept that the occasional passage of hotel guests to and from their boats from and to the hotel will amount to sufficiently substantial an interference with the reasonable user of the Defendants' home and grounds at Noosa Sound. Second, Mr. Caddick submits that the judge wrongly ignored the valuation evidence that the rights claimed would reduce the value of Noosa Sound from 300,000 to 150,000. He relies on the remarks of Tuckey L.J. in Batchelor at p. 462 for the proposition that the monetary effect of the rights may be relevant. I can see that in some cases the reduction in the monetary value of the servient land may evidence the fact that in Tuckey L.J.'s words the ownership of the servient land is "illusory"; but the fact that Noosa Sound subject to the rights still has a value of 150,000 hardly suggests an illusory ownership.
  64. I conclude that the judge was entitled to reach the conclusion that the rights claimed were capable of being easements, despite their adverse effect on the servient tenement.
  65. For these reasons, I would dismiss this appeal.
  66. I add a postscript on one point mentioned by the judge to which strong objection is taken by the Defendants. The judge in para. 23 commented that the Defendants had a home in Australia and that Mr. Robin Crouch has moved there too. The judge there speculated that the stance of the Defendants in the litigation was "not a genuine desire to retain Noosa Sound and the rather small bungalow, but a wish to exploit what seems to have been seen as an opportunity to extract an increased price for Noosa Sound." Mr. Caddick submits that such speculation was wholly unfair, the point never having been put to the Defendants or argued at trial, and is not based on evidence. On the contrary the Defendants had served notice to quit on the tenant of Noosa Sound on the basis that the Defendants intend to live there as their principal or only home. Further, Mr. Robin Crouch had visited his parents in Australia whilst he was recuperating from a serious operation. In the circumstances I think it unfortunate and regrettable that the judge saw fit to make that unnecessary and incorrect comment. But it does not affect the outcome of the case.
  67. Dyson L.J.

  68. I agree. I also agree with the judgment of Lord Justice Longmore, which I have had the benefit of reading in draft.
  69. Lord Justice Longmore:

  70. I entirely agree with the judgment of Peter Gibson LJ and only wish to add something of my own on the question whether it is right for us to have regard to the negotiations which led up to the contract made on 31st August 2001.
  71. It was settled by Prenn v Simmonds [1971] 1WLR 1381 that it is impermissible to construe a written contract by reference to previous negotiations between the parties. As Lord Wilberforce said in his speech (p. 1384G) the reason for not admitting evidence of negotiations is not a technical one or even one of convenience. "It is simply that such evidence is unhelpful". That is largely because any assumption, explicit or implicit, in any offer or counter-offer by a party, is not necessarily acceptable (let alone agreed) by the other party.
  72. There has to be an exception to this principle in cases where there is a claim for rectification of a written agreement. The party asserting rectification has to show a prior common intention continuing up to the date of the written agreement. It is almost inevitable that, in relation to such a plea, evidence of negotiations will be admissible in order that the court can reach a correct conclusion on the question whether such prior common intention is established.
  73. In the present case Mr and Mrs Crouch did counterclaim for rectification and the judge, rightly, referred to the negotiations and came to his conclusion upon them. That conclusion was that there was no common intention, shared by Mr Platt on the one hand and Mr and Mrs Crouch on the other, that the rights of riverside mooring should be excluded from the agreement for the sale of Petersfield House Hotel.
  74. There is no appeal from the decision of the judge to dismiss the counterclaim for rectification. The agreement for the sale of the hotel and the subsequent transfer, therefore, fall to be construed without reference to the antecedent negotiations of the parties.
  75. That does not mean that no antecedent documentation can be referred to. But, as Lord Wilberforce said at 1385H, the evidence has to be restricted to evidence of the factual background known to the parties at or before the date of the contract, including evidence of "genesis" and objectively the "aim" of the transaction. The concept of evidence of "the genesis and aim of the transaction" comes ultimately from Sir James Stephen's Digest of the Law of Evidence and Wigmore on Evidence via the judgment of Cardozo J in Utica City National Bank v Green (1918) 118 NE 607.
  76. The only document relevantly evidencing the genesis and aim of the contract for the sale of the hotel is the "Particulars of Sale". Those particulars said nothing about the riverside moorings as such but did make it clear that the hotel was being offered as a going concern making good profits on a specified turnover. In not untypical estate agents' language the particulars also said:-
  77. "The attraction of the Broads for leisure activities is hard to understate; it is a Mecca for activities such as boating, walking, fishing and for those interested in nature and it is this that provide the main driving force for the business."
  78. The natural implication from this is that those visiting the hotel by boat have been and will be able to moor their boats in the vicinity of the Hotel. In this I only reiterate the conclusion of the judge in paragraph 43 of his judgment where he said that the assets of the business, on any objective consideration, included advertising signs on Noosa Sound and the availability of moorings for use by patrons of the hotel.
  79. I am, therefore, satisfied that the rights claimed by the claimants were "continuous" and "apparent" rights which passed under the conveyance to them pursuant to section 62 of the Law of Property Act 1925, see Megarry & Wade, Law of Real Property, 6th edition (2000), para. 18-114. I am further satisfied that the case does not fall within the exception (recognised by Jenkins LJ in Wright v Macadam [1949] 2 KB 744, 751) of cases in which there can have been no expectation that the enjoyment of the right could be other than temporary. The paradigm example of such an exception is the right to light where it is known and contemplated by the parties to an agreement for a sale or lease of land that there is to be a building scheme under which the land is to be developed, see Birmingham, Dudley and District Banking Company v Ross (1889) 38 Ch.D. 295. What was there said to be knowledge common to both parties was derived from what Cardozo J would have called the "aim and genesis of the transaction" and was thus, rightly, in evidence. There was no evidence of any such "common knowledge" in the present case.
  80. Order: As per draft order
    (Order does not form part of the approved judgment)


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